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Viserion, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 15 years to maturity that is quoted at 108 percent of face value. The issue makes semiannual payments and has an embedded cost of 7 percent annually.
A. What is the company’s pretax cost of debt?
6.17%
7.20%
6.48%
5.87%
6.42%
B. If the tax is 37 percent, what is the aftertax cost of debt?
3.16%
3.70%
3.89%
4.05%
4.08%
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